Yuma farmland prices hold steady

Despite the current overall drop in real estate values, farmland prices for most winter vegetable[2] ground in the Yuma, Ariz., area remained mostly stable in 2009.

Prices held steady for ground located in the Yuma, Gila, Dome, and Bard (Imperial County, Calif.) valleys, areas closer to the Yuma-based vegetable processing and shipping facilities, according to Bill Moody, farm appraiser with Robert J. Moody Appraisers, Yuma.

“Land sales in these desirable areas affirm that good vegetable ground there will sell for about $25,000 an acre,” Moody said. “Farms sold in those areas were purchased mostly by farm operators or vegetable companies based in California. Most real estate investors are gone from the market.”

Moody was among a handful of rural appraisers and farm managers who shared 2009 Arizona farmland and crop value analyses during the 2010 Spring Ag Forum in Tempe, Ariz. The event was sponsored by the Arizona chapter of the American Society of Rural Appraisers and Farm Managers.

An estimated one-fourth of Yuma-area vegetable acreage (40,000 acres) has been winter fallowed in recent years due to overproduction and low crop prices. The reduction has softened some land values located farther away from Yuma, Moody says.

Land prices and rents softened slightly in the eastern and central Wellton-Mohawk Valley in 2008. Moody said the trend spread in 2009 to the west Wellton area, the lower Yuma Valley, and the western Bard Valley. Planted acreage in Bard, located across the Colorado River from Yuma, has fallen about 2,000 acres from the previous season.

“Growers abandoned the growing areas that were the most difficult for them,” Moody said.

Another factor affecting the total vegetable acreage decline, Moody says, was the 2009 bankruptcy closure of Salyer American Fresh Foods. Salyer American had about 2,600 acres of vegetable production in the Yuma area. Not all of Salyer’s acreage was picked up by other farmers.

Yuma County is often ranked in the top 20 counties nationally in gross agricultural income with an estimated $1.3 billion total economic value. Agriculture accounts for about 40 percent of the county’s economic base.

Sales and prices of raw agricultural land trended lower in Maricopa County in 2009, according to Charles Havranek of Headquarters West Ltd., Phoenix. Raw per-acre land prices declined especially further out from Phoenix.

Raw land prices are depressed, but some buyers are coming back into the market at the current (lower) price levels. “Cash is king,” Havranek says, noting that the lack of 1031 exchange funds and institutional financing requiring greater equity margins and solid cash flows have reduced buying ability.

Land speculation from 2003-2006 pushed some farmland prices to $15,000 in the Gila Bend area.

Cash rent prices are edging higher in most areas with lower water costs and where tenant farmers compete for limited supplies of available farmland.

Havranek says water costs and irrigation assessments are creeping higher in 10 of the 12 irrigation districts in Maricopa County.

• Pinal County

The value of all land in Pinal County dropped significantly from about $25,000/acre in 2008 to $9,800/acre in 2009, according to Duane Webb of Southwestern Ag Services LLC, Mesa, Ariz.

“The rural and speculative land market appears in worse condition with very few sales in 2009,” Webb said. “Current indications are that prices have decreased over 80 percent in some areas compared with the peak market.”

The average land price in 2007 was about $19,600. Price declines began in 2006.

“The market can only go higher,” Webb says. “There are people (buyers) out there with money and they will buy land when it gets down to about $2,000 (acre) depending on the location. No one is willing to sell for that amount.”

• Southeastern Arizona

The bottom fell out of the speculative farm real estate market in Cochise County in 2009, says Mark Finley Jr., owner, Finley Appraisal Services, Willcox, Ariz. Farmland which sold in the speculative market for up to $5,000/acre now sells for less than $1,000/acre.

Current farm sales are primarily limited to older operations. Current rents are $100-$125/wet acre (center pivot) in Cochise County.

“There appears to be good demand for farm rentals,” Finley said. “Rental rates could fall due to lower real estate values and commodity prices combined with increased production costs.”

No real estate (agent-based) farm sales occurred in Graham County’s Gila River Valley in 2009. Many sales and rentals in Graham County are between family members. Rents in the valley remain constant at $100-$150/acre (flood irrigated), Finley says.

• Imperial Valley (California)

Farmland prices in Imperial County are fairly stable with few sales, says Tom Turner of Farm Credit Services Southwest, Yuma.

Good adaptability land for produce production ranges from $6,000-$8,500/acre; rent $200-$350/acre, Turner says. Average adaptability land for alfalfa is valued at $3,000-$5,000/acre; rent $125-$200/acre. Organic ground is valued at $6,000-$8,500/acre; rent $200-$400/acre.

Irrigated field crop and produce land values in neighboring Palo Verde Valley (Riverside County, Calif.) range from $7,500-$10,000; rent $175-$268.

• Dairy

2009 was a very tough year for many Arizona dairy farmers as blended milk prices dropped under $12 per hundredweight. The good news was feed and other input costs declined from 2008 record levels.

“Even the most efficient dairy producers had big losses for at least the first nine months of 2009,” said Tom Van Hofwegen, Farm Credit Services Southwest, Tempe, Ariz. “Large amounts of equity were lost in the industry and the (financial) damages may be irreparable for some producers.”

2010 could be a breakeven to profitable year for efficient producers with milk price forecasts in the $15/hundredweight range.

Rental per-cow space rates are stable to lower due to many facilities for sale or lease. Rents currently range from $7-$18 ($10-$12 is normal) with the higher price for modern Saudi-style facilities with improvements.

Three rounds of a producer-funded herd reduction program in 2009 reduced Arizona’s dairy herd by about 26,500 cows from 18 facilities, or about 14 percent of the state’s dairy herd, Van Hofwegen says. About 202,000 cows were removed from the market nationwide.

At least five Arizona dairies were for sale in late February.

“Feed and fuel costs could increase in 2010 raising the breakeven levels and offsetting milk price increases,” Van Hofwegen said. “Declines in land value have decreased the ability to borrow money to cover losses.”

• Citrus

Few citrus farm[3] sales have occurred over the last few years in Arizona’s citrus industry with most sales in the Yuma area, says Scott Halver, Ganado Group, Inc., Phoenix.